Best Strategies to Save On Your Personal Tax

Is “saving more money” your top financial resolution for 2015? We are here to help.

No doubt, Tax planning is an integral part of personal financial planning. Saving for the future is of paramount importance to all locals and expats residing in Singapore.

Thanks to the tax code, there are several ways to maximize deductions and lower your tax burden. In addition, there are a few lesser known avenues that offer additional tax breaks to individuals.

Income Tax Rates

In Singapore, residents have lower tax rates than non-residents. The latter are taxed at a flat rate of 15% or 20%, depending on the type of income. There is no tax on income derived and received outside of Singapore, and no capital gains or charge-related taxes.

NOTE: With effect from YA 2017, the government is raising the marginal tax rates that affect the top 5 per cent of Singapore’s income-earners as per the Budget 2015. The top marginal rate will go up to 22%, from the current 20%, for the highest income-earners with a chargeable income above S$320,000. These changes will apply starting with income earned from 1st January 2016 to 31st December 2016 on taxes to be paid in 2017.

Reliefs available to all Singaporean and Permanent Resident Taxpayers

CPF cash top-up relief

A taxpayer who is a Singapore citizen or permanent resident and makes a cash top-up to his/her CPF in his/her Special Account [for recipient below age 55] or Retirement Account [for recipient age 55 and above] under the CPF Minimum Sum Topping-Up Scheme is eligible for this relief. In addition, the taxpayer is also entitled to claim an additional $7,000 of cash top-up relief if he/she makes cash top-ups to the CPF Special Account or Retirement Account of his / her parents / parents-in-law, grandparents /grandparents-in-law, spouse and siblings, regardless of the age of the recipients.

NSman (self/parent) relief

NSman tax relief’ is a relief to recognise the contributions of NSmen and NS Key Appointment Holders to total defence. This relief is for those who have completed full-time national service and is automatically given.

Parenthood Tax Rebate (PTR)

Parents are eligible to claim the Parenthood Tax Rebate (PTR) of $5,000 for their 1st child, $10,000 for the 2nd child, and $20,000 for the 3rd and each subsequent child. Both the father and the mother may share the PTR to offset their income tax payable. Any unutilized rebate can be used to offset the income tax payable in subsequent years until the rebate is fully utilized.

Child Reliefs (QCR and HCR)

In recognition of efforts by families in supporting their children and those caring for handicapped children, parents can claim a tax relief of $4,000 per child under the Qualifying Child Relief (QCR), or $5,500 per child under the Handicapped Child Relief (HCR).

Working Mother’s Child Relief (WMCR)

One can claim the Working Mother’s Child Relief (WMCR) at 15% of their earned income for the 1st child, 20% for the 2nd, and 25% per child for all subsequent children, with a maximum cap at 100% of the earned income. The total amount of QCR/HCR and WMCR claimable for each child is capped at $50,000.

Child

Working Mother’s Child Relief Amount

1st

15% of mother’s earned income

2nd

20% of mother’s earned income

3rd and beyond

25% of mother’s earned income

Maximum claim allowed

capped at $50,000 per child
Cumulative WMCR percentages are capped at 100% of mother’s earned income

(Note: Single mothers are not eligible for two parenting benefit schemes – the Working Mother’s Child Relief and the Foreign Maid Levy Relief)

Grandparent Caregiver Relief (GCR)

For a working mother whose parent, parent-in-law, grandparent or grandparent-in-law is looking after any of the Singapore Citizen children aged 12 years and below, then they are eligible to claim the Grandparent Caregiver Relief (GCR) of $3,000.

Medisave Contributions & Voluntary Contributions to Medisave Account

Voluntary contribution to ones’ own Medisave Account on top of the compulsory CPF savings, makes the taxpayer eligible for this relief. The amount of relief allowed for voluntary Medisave contributions is limited to the lowest of either of the following:

Voluntary cash contributions made specifically to the Medisave Account

Annual CPF cap less the mandatory contribution by taxpayer and your employer

Prevailing Medisave Contribution Ceiling of $41,000 less the balance in Medisave Account prior to voluntary contribution.

Reliefs available for ALL Taxpayers in Singapore

Course Fees Relief

Aimed at the working professional, the relief can be claimed as long as the course leads to an approved academic or professional qualification, relates to the trade or business the person is in, or does not relate to the trade or business but is now relevant due to a career change. Course fees relief were introduced to motivate people to constantly upgrade themselves and remain gainfully employable. Unfortunately, IRAS does not have a specific listing of approved academic and professional courses but a general rule of thumb is that if the course, seminar or conference is not for leisure or to acquire general skills and knowledge then it is claimable for course fees relief.

Foreign maid Levy Relief

This Relief encourages married women to stay in workforce and also plan a family. An individual is eligible to claim twice the total foreign domestic worker levy paid in the previous year, on one foreign maid if any of the following conditions applies:

Has a Singapore Citizen child who is aged below 12 years staying in the same household.

Taxpayer or his/her spouse who is staying in the same house-hold is a Singapore Citizen aged 65 years

Has Singapore Citizen parent, parent-in-law, grandparent or grandparent-in-law aged 65 years old or above staying in the same house-hold.

Taxpayer has a disability, or has family members with disabilities staying in the same household, and requires a full-time caregiver’s assistance in daily activities.

Spouse Relief

As per IRAS, spouse relief is meant for supporting families and providing recognition to both male and female taxpayers who supported their spouses. One may claim this relief if the spouse does not have an annual income of exceeding $4,000 in the previous year. The income criterion does not apply for handicapped spouse. It is capped at $2,000 for Spouse Relief; or $3,500 for Handicapped Spouse Relief.

Supplementary Retirement Scheme (SRS)

The SRS scheme is designed to help save for the future, while reducing tax expenses at the present time. The Supplementary Retirement Scheme (SRS) is a voluntary scheme introduced in 2001 to encourage individuals to save for their retirement, over and above their CPF savings. The SRS addresses to the financial needs of a greying population by helping Singaporeans to save more for their sunset years. The SRS complements the Central Provident Fund (CPF).

Who is eligible to open an SRS account?

All Singaporeans, Singapore Permanent Residents (SPRs) and foreigners who are at least 18 years old and are not undischarged bankrupt. The SRS contribution rate for Singaporeans and Singapore Permanent Residents is 15% while the SRS contribution rate for foreigners is 35% owing to the fact that they do not enjoy tax relief on their CPF contributions.

Why should I contribute to SRS?

SRS is a voluntary scheme which offers tax benefits in the form of a tax relief for every dollar you contribute up to a maximum of $12,750 per year. There is no minimum amount and you are free to contribute any amount to your account with any of the SRS operators namely DBS, OCBC & UOB Banks.

Investment gains will accumulate tax-free in SRS

Tax will be payable only when you withdraw your SRS savings. If you withdraw your SRS savings upon retirement, only 50% of the savings withdrawn will be subject to tax. Spreading out withdrawals will generally result in greater tax savings

Life Insurance Relief

Life insurance relief is a relief on annual insurance premiums paid on your own or your wife’s life assurance policies. One can apply for this relief if he/she satisfies the conditions below:

The total compulsory employee CPF contribution or self-employed Medisave/Voluntary CPF contribution or both in the previous year is less than $5,000.

One has paid insurance premiums on his/her own or your spouse‘s life assurance policies.

Most local employees (say with gross monthly salary exceeding S$ 2,100) are likely to reach the limit of annual CPF contributions $5,000, which means they may not be able to utilize this relief. Hence, this relief is mostly beneficial to individuals who are either not subject to CPF contributions or individuals having lower CPF contributions.

Reliefs For All High Net Worth Individuals (HNWI)

Cash donations

Cash donations have the added benefit of getting tax deductions which are 2.5 times the amount one donates. For every S$1 donated, one gets S$2.50 off the taxable income. The charity donation has to be recognised as an Institution of Public Character (IPC).

Shares donations

Similar to cash donations, donating shares to IPC-status charity will garner tax deductions of 2.5 times the assessed amount of the shares.

Land and artefact donations

Donation of worthy collection items, either to an IPC charity (land) or to an Approved Museum (artefact) is considered tax deductible. The value of the artefact or the land will be assessed by the respective organisations and the taxable income will be decreased by 2.5 times the value of the donation.

Public Art Tax Incentive Scheme (PATIS)

PATIS encourages the contribution of sculptures or art of work for public display to promote the art scene in Singapore, by giving tax deductions at 2.5 times the value of the art piece.

For New Tax Residents Who Travel Significantly Outside Singapore With Respect to Employment.

NOR Scheme (Not Ordinarily Resident Scheme)

An individual can qualify for the NOR scheme for a period of 5 years of assessments if the following criteria are met:

The individual must be a tax resident for the YA in which he wishes to qualify for the NOR scheme.

The individual must not have been a Singapore resident in the 3 consecutive YA before the year he first qualifies for the NOR scheme.

Under the NOR scheme, a qualifying individual employed by a Singapore employer can enjoy one or more of the following tax concessions:

Time apportionment of Singapore employment income including perquisites and leave pay (subject to a minimum Singapore employment income of S$160,000 and to spending at least 90 days outside Singapore for business purposes), subject to a minimum effective tax rate of 10%.

Tax exemption of employer’s contribution to non-mandatory overseas pension fund or social security scheme (not applicable to a Singapore citizen or a Singapore permanent resident (SPR) and the qualifying individual must derive a minimum income of S$160,000. In addition, the employer must not claim a deduction for the contributions).

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